No one knows a business’s legal landscape better than lawyers specializing in many aspects. When you’re starting or running a company, it’s crucial to consult with these experts to make sure you’re making sound decisions that won’t come back to bite you later on.
When you’re in the business world, it’s essential to understand often utilized legal terms and what they’re for, especially if you’re new to the business. Knowing what they mean can help you make better decisions for your company.
Here are a few legal terms used in business and why they matter:
Negotiation
It’s a process in which two or more parties try to reach an agreement by exchanging offers. Negotiation results can significantly impact your business moving forward, so you must understand what you agree on before signing anything. If you’re unsure what the other party expects from the negotiation, or if you don’t feel comfortable with the terms being discussed, consult with a lawyer before proceeding.
Contract
A contract is a legally binding agreement between two or more parties. It sets out the agreement’s terms and conditions, as well as the rights and responsibilities of each party. Moreover, it should always contain provisions that all parties agree to or have compromised regarding their business. Suppose any disputes or disagreements arise, and it’s a matter that affects other provisions. In that case, contracts also contain the necessary steps to resolve issues.
Due Diligence
The due diligence stage involves investigating a potential business partner or investment before signing any contract. This stage ensures that you are fully informed about the other party, including their financial stability, business practices, and legal history. Hiring due diligence services to deal with potential risks, such as fraud or misrepresentation, can help guarantee protection for all parties involved in the transaction.
Force Majeure
Force majeure is a legal term that refers to an event or occurrence beyond either party’s control of a contract. It might be due to natural disasters, war, and civil unrest. It could also be any other event that makes it impossible for either party to fulfill their contractual obligations.
This legal term has moved to the forefront of many business dealings due to COVID-19. Quarantine protocols have significantly impacted the global economy and many industries. Force majeure allowed some businesses to eliminate their contractual obligations to prevent further loss.
Breach of Contract
When two or more people enter a contract, they agree to specific terms and conditions that both parties will follow. A breach of contract is when one party fails to meet its obligations as outlined in the agreement, causing damages to the other party. Violations can be intentional or accidental, but they can lead to costly legal battles. It also provides security for involved parties that there will be consequences if one of them fails to do their responsibilities as obligated by a signed contract.
Indemnity
Indemnity is a legal term that refers to one party’s agreement to compensate another party for any losses or damages due to their actions or negligence. And to stop any further losses from happening. The compensation they must pay the affected party depends on the losses incurred. Hence, contracts often have this type of agreement among their clauses.
Intellectual Property
Intellectual property or IP refers to any original work or idea protected by law from being copied or used by outside parties without permission. Businesses often have intellectual property rights to their products, brand names, and logos. IP protects these assets by officially recognizing them as belonging to a particular owner or company. Having the correct IP attached to a specific asset allows the owner to take legal action to hold outside parties accountable if they use these assets without permission.
Confidentiality Agreement
When two or more parties enter a confidentiality agreement, they agree to keep any shared confidential information. Such information includes trade secrets, financial information, and other sensitive data. This type of agreement helps secure all parties involved by ensuring that no one can reveal confidential information without consent from the other party.
However, a confidentiality agreement and a non-disclosure agreement have different purposes. A confidentiality agreement protects confidential information shared between two or more parties. In contrast, a non-disclosure agreement protects trade secrets.
Legal terms are essential in any business, but they can confuse new small business owners without prior contract experience. This article has outlined some of the most common legal terms and their definitions. If you’re feeling overwhelmed by all of the legalese, don’t worry! You can consult an attorney to get more specific help understanding these concepts.